The NZD/USD pair slips back below mid-0.5900s during the early European session on Thursday, back closer the weekly low, touched the previous day.
The US Personal Consumption Expenditures (PCE) Price Index, released on Wednesday, pointed to still-sticky US inflation and reaffirmed bets for at least one interest rate hike by the US Federal Reserve (Fed) in 2026
The hawkish outlook, in turn, helps the US Dollar (USD) preserve the overnight gains and acts as a headwind for the NZD/USD pair. However, the US Treasury’s buyback strategy keeps US bond yields depressed, which, along with the optimism over a potential US-Iran deal and the reopening of the Strait of Hormuz, caps the safe-haven buck. In fact, media reports suggest that the US and Iran have reached a new ceasefire deal that would be announced in the coming days.
Furthermore, Iran and Oman have agreed on a temporary maritime route for commercial ships travelling through the waterway. This eases inflation fears stemming from higher energy prices, holding back USD bulls from placing fresh bets and supporting the NZD/USD pair amid the Reserve Bank of New Zealand’s (RBNZ) hawkish tilt. Traders, however, seem hesitant and opt to wait for more cues about the Fed’s future policy path to determine the next leg of a directional move.